Study Reveals Best Equity, Debt, And Gold Mix For Consistent Return Over Long Run

Equities have historically outperformed most other asset classes over the long term. But putting all your money into stocks can be a risky bet. Equity is also among the most volatile asset classes, and not every investor is comfortable seeing wild swings in their portfolio.

While equities may deliver the best returns over the long run, not all financial goals are long-term. 

Investors often need money for near-term expenses such as emergencies, education, or large purchases. If investors need money at a time when the equity market is in a downturn, then they may be forced to withdraw at a loss. In such situations, what is otherwise the best-performing asset class over the longer period can end up underperforming when it matters the most.

This is where diversification comes into play. Spreading investments across multiple asset classes, such as equities, debt instruments and gold, can help ride out market volatility. When one asset class underperforms, another may help cushion the downside, and make overall returns more stable.

Financial planners often stress that diversification is not just about holding different assets, but also about allocating them in the right proportions. The key question for investors, therefore, is not whether to diversify, but how much to allocate to each asset class and in what ratio to strike the right balance between risk and return.

Equity, Debt, Gold: Which Ratio Delivers Consistent Returns

A report by investment website Funds India titled Wealth Conversation reveals the best asset allocation ratio among equities, gold and debt that has outperformed all other asset allocation strategies.

The report found that a portfolio with 70 per cent equity, 15 per cent debt and 15 per cent gold delivered returns above 10 per cent in 92 per cent of seven-year periods between January 2000 and February 2026.

The analysis used rolling returns across different asset allocation strategies. It represented Indian equities using the Nifty 50 Total Return Index (TRI), while it derived debt returns from low-duration and corporate bond funds. The study converted gold prices into rupee terms and assumed that portfolios were rebalanced annually whenever allocations deviated by more than five percentage points.

The report shows that the 70:15:15 allocation not only delivered strong returns, but also remained fairly consistent. Over seven-year periods, the portfolio generated an average annual return of about 15.10 per cent. The lowest return during these periods was around 7 per cent, while the highest was close to 28 per cent.

The chances of earning double-digit returns were higher for this diversified portfolio compared to several other asset allocation strategies analysed in the report.

How Other Asset Allocation Strategies Performed

The report also compared several other asset allocation mixes.

A portfolio with 70 per cent equity and 30 per cent debt delivered returns above 10 per cent in about 87 per cent of seven-year periods, slightly lower than the 70:15:15 mix.

A 50 per cent equity, 25 per cent debt and 25 per cent gold portfolio delivered double-digit returns in around 80 per cent of the periods, while a 50 per cent equity and 50 per cent debt portfolio did so in about 71 per cent of cases.

More conservative portfolios with higher debt exposure showed lower chances of strong returns. A 30 per cent equity and 70 per cent debt portfolio delivered double-digit returns in only about half of the seven-year periods analysed.

Trade-Off Between Risk And Return

The report also showed that reducing equity exposure may lower volatility, but it also lowers the chances of earning higher long-term returns.

On the other hand, portfolios with higher debt exposure see smaller declines during market downturns, but they also generate lower long-term returns.

In contrast, equity-heavy portfolios can deliver higher returns, but face larger drawdowns during market corrections.

A diversified portfolio that includes all the three assets – equities, gold, and debt – helps balance these risks.